Do you have remote employees scattered around the globe or are you planning to go fully remote? One major challenge of running a global business is salary benchmarking.

You may wonder how to pay your remote workers fairly and cost-effectively. If your goal is to attract top talent and retain your best workers, you need a global strategy for employee compensation.

Many business owners are unsure about how to implement salary benchmarking. If you’re in this situation, we can help.

Here’s the complete guide to salary benchmarks for a global workforce.

What Is Salary Benchmarking

The purpose of salary benchmarking is to ensure your business is offering competitive salaries and to create or adjust your compensation policy as needed. This involves comparing your company’s wages against market values in your industry.

When your business includes global employees, the process is more complex. You want to send a message of transparency and fairness to your candidates, employees, and investors.

The process of salary benchmarking includes:

  • Making informed decisions about fair compensation
  • Attracting and retaining top talent
  • Increasing productivity and engagement
  • Ensuring fairness for the employee and local community

Salary benchmarking ensures equity for your employees and may increase your bottom line.

Data for Salary Benchmarking

Some of the data employers use to determine salary benchmarks include:

  • Salary surveys from employees and employers
  • Crowdsource data
  • Data from job postings
  • Government labour market data
  • Advice from an international compensation and benefits expert

If you’re hoping to find a salary benchmark strategy that works for your employees and the future of your business, talk to someone who has the knowledge and experience to help you with international employee compensation.

A Global Strategy for Compensation

There is no exact science to salary benchmarking. Companies approach it in various ways.

What works for one company may not work for you. However, there are three approaches you can take.

Before you begin salary benchmarking, you should have your business plan in place and your employees’ global locations in mind.

Once you have accomplished this, consider these three approaches.

Pay Staff at the Current Local Rates 

Many global businesses choose to pay their staff based on location. This compensation method considers the local market rates for workers, the cost of living, or a combination of both. With this method, employers can adapt to market changes as they occur.

A key advantage of paying local rates is that it allows you to stay competitive in both low-wage and high-wage areas. Although all employees may not receive the same wages, they can enjoy a similar standard of living.

This payment method also ensures you’re not overpaying in low-wage areas. This can allow you to hire more talent and save money in the process. 

Pay Workers Based on Location Bands

With this compensation method, employers use local data to group location costs into bands. A banded approach attempts to close gaps in traditional compensation approaches that do not translate well to remote teams.

With a banded approach, you may have workers doing the same job in different parts of the world receiving marginally different salaries. A disadvantage to the banded approach is the risk of overpaying some employees.

Pay Everyone the Same No Matter the Location

An alternative to localising salary benchmarks is paying all employees the same regardless of location. Workers in the same positions in Denver and New Delhi would receive the same compensation and benefits package.

This comes down to the philosophy of “equal work for equal pay.” And there are some advantages to this approach.

Paying equal rates of compensation allows remote employees to live and work wherever they choose. There’s no penalty to pay for moving to a location that has a lower cost of living.

Some employers take the viewpoint that work has a fixed value regardless of its geography. Equal pay is simpler when it comes to logistics and data as well.

The Downside

But there is a downside to this approach. If you choose to pay everyone a New York City market rate, it will be expensive for your company. If you choose a city with a lower benchmark, you could lose competitiveness in more affluent areas. 

This could result in a less diverse team. Those who remain in areas with a higher cost of living end up with less disposable income than those in other areas around the globe.

The concept of equal pay is questionable when a worker in one location gets more out of their salary than an employee in another part of the world. There’s also the possibility of losing good employees due to local employers offering above-market rates in lower-wage areas.  

You must consider all of these possibilities when making decisions about employee compensation for global employees. Talk to an expert in international employment compensation before deciding on salary benchmarks.

Review Your Benchmarking Strategy Regularly

The need for top talent is ongoing, and base salary remains one of the weapons to draw in the best and brightest. Because of this, market rates are always changing.

Inflation and the ever-increasing cost of living make keeping up with salary benchmarking a challenge. To remain fair and competitive, it’s a good practice to review location factors and salary benchmarks twice a year.

This helps ensure you make the right decisions for each worker and your company’s long-term success.

Salary Benchmarking for a Global Workforce

If your business is expanding globally or if you plan to employ a fully remote workforce, fair compensation for all will remain a primary concern. You want to provide an incentive to attract top talent while ensuring you’re doing what’s best for the growth of your business.

Salary benchmarking is a necessity for global business today. If you need assistance with a global strategy for compensation, we’d love to assist you.

At Bradford Jacobs, we see a world of opportunities without limitations. We are a business expansion and international employment consultancy whose goal is to create a long-lasting, positive influence on the global economy by changing the way companies do business. 

Contact us today to see how we can help your business succeed.